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Wine is one of Chile’s most emblematic exports, recognized worldwide for its quality and variety. With the growing popularity for Chilean wine around the world, the industry aims to grow even more.

Wine grapes are not native to the Americas. They arrived in the 1500s with the Spanish missionaries who needed wine to celebrate the Catholic mass. Today Chile is the world’s eighth-largest wine producer and fifth-largest exporter, selling to 150 markets and reaching a market share of 8% by volume of the global international wine market at the close of 2010.

But Chile is planning to conquer an even bigger share of the market.

“We want to play a key role in Chile’s progress,” says René Merino, President of Wines of Chile, a public-private organization created to promote Chilean wine exports. “We are convinced of the enormous potential of Chile’s wine industry, its importance at the global level as a world-class producer, and its multiplying effect on the image of Chile.”

Industry plans are to position Chile as the leading New World producer of premium, diverse and sustainable wines by the year 2020, increasing the value of bottled wine exports to $3 billion within a decade.

With an estimated 8,000 producers of wine grapes, the country’s planted area of vines for wine has increased over 70 percent during the last eight years and is now estimated to be 119,000 hectares. Out of the total planted area, around 76 percent are red varieties. Also, close to 75 percent of all planted area is under irrigation.

Due to low domestic consumption, Chile exports 70% of the wine it produces making it the world’s most globalized wine industry. In 2011, wine production reached an all time record level of 1,046 million liters, a 14% increase over 2010. This exceeds the previous production record of 1,009 million liters in 2009.

Improvements in quality and low prices help to keep or increase exports levels. Chile traditionally exports both bottled and bulk wine. Bottled wine exports expanded more than bulk wine exports in 2010 and so a large number of wineries are making a big effort to increase premium-bottled wine exports. Currently, there are more than 70 Chilean wineries that export.

Chile’s main export markets are Europe followed by the U.S. and China. The industry continues its focus on the Asian markets, however, less than 10% of total exports go to that market, according to Wines of Chile.

Wine takes off

After centuries of obscurity, Chilean wines experienced an aggressive growth spurt in the 1980s. This was due partly to foreign investment from Spain, France, Italy and the U.S. that provided Chilean vineyards with upgraded technology and facilities. Many well known foreign vintners have also developed wineries in Chile, including such prestigious labels as Bodegas Torres, the Rothschilds, Pernod Ricard, Kendall-Jackson, Franciscan State and Bruno Prat and others.

In less than ten years, Chile began to produce first-class wines that were becoming recognized around the world for their quality and style, and demand abroad for Chilean wine began to grow. To meet the increase in demand, Chile vastly increased the amount of land for planting. Between 1996 and 2006, the amount doubled from 56,000 to 117,000 hectares. Later, other regions were added including for the first time the north and south of the country. The newest vineyards are planted along the coast and in the Andes Mountains at altitudes up to 2,000 meters.

But it is Chile’s Central Valley that is its winemaking treasure. Sprawling over 1,200 kilometers north to south, the valley benefits from an ideal Mediterranean climate and wide diversity of soils. The Andes on the east and the Pacific on the west provide cool breezes that regulate temperatures and result in a higher range of terroirs.

A unique facet of Chilean wine-growing environment is that because of the country’s geographic isolation, little or no pesticides are used to ward off grape-eating predators.

As a result, Chile, along with Argentina, is one of only two countries in the world not afflicted by the lethal phylloxera pest, an insect that devastated European vineyards in the late-19th Century and decimated the vineyards of California in the 20th.

Currently no significant expansion in production is expected as more than 95% of the planted area is in full production. Any production increases that occur will be because of the weather, vineyard management improvements and on future expansion or replacement of existing but low-producing vineyards.

The government provides no direct subsidies to support wine production or subsidize exports. Although Chile does have a successful market promotion campaign called “Tastes of Chile” that includes wine. The government contributes 15% of the total promotion costs through its export promotion agency ProChile.

Chile’s wine conquest

The spark for the Chilean wine company Concha y Toro’s extraordinary growth was ignited in the early 1990s, when the father of the current CEO had a vision of grandeur.

With an unwavering confidence in the quality of Chile’s wine potential – what oenologists might call the ‘terroir’ – Eduardo Guilisasti set about constructing the company into what is now the world’s 8th largest wine producer. Concha y Toro is now listed in New York and sells over 28 million cases, of which 67% abroad, representing 2009 revenues of $643 million.

“The strategy behind this success,” explains Thomas Domeyko, export director, “was part Chilean and part Harvard Business School (which has published a case). The Chilean portion is our true gift of fantastic wine country: beautiful valleys with abundant water; a coastal mountain range that protects us from the cold Pacific currents; vast longitude suitable to different cépages (grape varieties).”

As for the business vision, Concha y Toro has skilfully expanded along four dimensions. “We are double-branded,” explains Domeyko. “We have six winery brands, including the original Concha y Toro, and Almaviva, our venture with Baron Philippe de Rothschild. Then, within each winery, we produce wines under different labels. Our investment in global wine brands – such as Casillero del Diablo – has been instrumental to our success.” The third dimension is geographical, with vineyards in nine different valleys in Chile and Argentina.

“Our fourth dimension is our export scope,” adds Domeyko. “We sell in 135 countries and have our own distribution in the UK, Brazil and Scandinavia. From 10 export employees in 2000 we are now up to 100 people. Their understanding of these markets is key to our success.”

Saved from Extinction

Carmenere was one of the most widely planted varieties in Bordeaux until the 1860s when the deadly phylloxera louse arrived in Europe. Carmenere vines are particularly defenseless to phylloxera and so the variety was abandoned when phylloxera-resistant American rootstocks were introduced in France.

Prior to the phylloxera crisis, Chilean vignerons took cuttings from Bordeaux vineyards thinking they were Merlot, which is similar-looking to Carmenere. In doing so they unwittingly saved Carmenere from extinction.

The mistaken variety came to be known as Chilean Merlot. The error was not discovered until 1994 when DNA research carried out in Montpellier, France, confirmed that it was Carmenere. Since then Carmenere plantings have grown rapidly, from 330 hectares in 1997 to 8,411 hectares in 2008, representing 7% of Chile’s total vineyard plantings.